Climate Change and the U. S. Economy: The Costs of Inaction Frank Ackerman and Elizabeth A. Stanton



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3. The costs of inaction

Chapter 2 described the impacts of the business-as-usual scenario, the worst of the likely outcomes that would be expected if past emission trends continue unchecked. The costs in just four areas that we could quantify – hurricane damages, sea-level rise, energy costs, and water supply costs – are projected to rise rapidly, reaching a combined total of 1.8 percent of U.S. GDP per year by 2100; these are the costs over and above the costs that would result from population and economic growth in the absence of climate change.


How much effect can we have on reducing these climate-induced losses by limiting our emissions of greenhouse gases? It is, unfortunately, no longer possible to avoid all adverse climate impacts. Some change from the pre-industrial climate has already taken place, and more is bound to occur as a result of greenhouse gases in the atmosphere, as well as the additional emissions that will be released in the very near future (too soon for policy changes to take effect). This chapter presents our four case studies using an alternative scenario, the rapid stabilization case, designed to represent the best we can realistically hope for at this point. The difference between business-as-usual and rapid stabilization is the cost of inaction, or the potential savings that can come from reducing greenhouse gas emissions, just from these four types of damages.
As noted in Chapter 2, we assume that the size of the U.S. economy and population will be the same in both cases. This (perhaps unrealistic) assumption is useful in clarifying the meaning of our two cases, and the contrast between them: all the economic differences between the business-as-usual and rapid stabilization cases reflect different climate impacts applied to the same economy, not changes in the underlying projections of GDP or population.


Rapid stabilization case: Low emissions, good outcomes

With immediate, large-scale reductions in greenhouse gas emissions, it is still possible for changes in the world’s climate to remain relatively small. The rapid stabilization case is an optimistic estimate of the impacts of the most rigorous policy prescription under discussion today: “80 by 2050”, or an 80 percent reduction in U.S. emissions by 2050, accompanied by a 50 percent reduction in total world emissions, and continuing reductions thereafter. The rapid stabilization case is the best of the likely impacts under that low emissions scenario. In the rapid stabilization case, global mean temperature rises 2ºF and sea levels rise 7 inches by 2100, but precipitation levels, hurricane intensity, and other climatic trends remain at their historical levels. It should be emphasized that this low-impact future climate is simply not possible unless we achieve significant reductions in greenhouse gas emissions, in the United States and around the world, in the next two decades.


If we want to keep the global average temperature from exceeding 2ºF above year 2000 levels and avoid a complete melting of the Greenland ice sheet and most other adverse climate impacts, we must stabilize the atmospheric concentration of carbon dioxide at 450ppm or lower.28 In order to stabilize at 450ppm, global emissions of greenhouse gases must begin to decline by 2020, reaching one-half their current levels by 2050 and one-quarter of current levels by 2100. Because the United States’ one-twentieth of world population bears responsibility for a full one-fifth of these emissions, U.S. emissions would have to decline 80 percent by 2050 in order to meet these goals (UCS 2007).
Of the six main scenarios that the IPCC describes as “equally probable” (Schenk and Lensink 2007), B1 has the lowest emissions, with atmospheric concentrations of CO2 reaching 550ppm in 2100. The concentration levels and temperatures of the rapid stabilization case are below the low end of the likely range of B1 impacts. Because there is no IPCC scenario as low as the rapid stabilization case, we have approximated the low end of the likely temperature range for atmospheric stabilization at 450ppm of carbon dioxide using data from the Stern Review (2006).29 Regional U.S. temperature increases above year 2000 levels are reported in Table 10.
Table 10: Rapid Stabilization Case: U.S. Annual Average Temperatures by Region



Sources: Stern (2006); IPCC (2007b); authors’ calculations.
The concentration of greenhouse gases in the atmosphere will affect the climate of every city, state, and country somewhat differently. Most of the United States will experience a larger temperature increase than the global average. While global mean temperature rises a little less than 2ºF by 2100 in the rapid stabilization case, average annual temperatures in most of the U.S. mainland will increase by 3ºF and Alaska’s annual average temperature by 4ºF. The average annual temperatures that we report are an average of day and nighttime temperatures for every day of the year. A small change in annual average temperatures can mean a big difference to a local climate. For example, the historical average annual temperature is 50ºF in Boston, 53ºF in New York City, and 56ºF in Washington D.C. The rapid stabilization scenario – with the lowest plausible emissions – still represents a significant change to local climates throughout the United States in the next century. Three degrees Fahrenheit is a big change, but if it happens at a slow enough pace, each locality should be able to adapt to its new climate. Of course, this adaptation will not be costless.
The area of the United States that will suffer the most extreme impacts, even in the rapid stabilization case, is Alaska, where glaciers, sea ice, and permafrost are already retreating today, and an even greater upheaval to ecosystems, infrastructure, and industry can be expected in the decades to come. U.S. Gulf states, Florida, Hawaii, and U.S. territories in the Pacific and the Caribbean, in contrast, will experience smaller temperature changes – much closer to the global mean – than the majority of U.S. states. On the other hand, island and coastal regions are more exposed than the interior of the country to other aspects of climate change, such as increased storm damages and sea-level rise. In our study of climate impacts on Florida (Stanton and Ackerman 2007), we found these factors, plus climate impacts on the tourism industry and the electricity sector, could lead to large aggregate damages to the state economy.
In the best case, rapid stabilization scenario, sea levels will still rise in the United States and around the world. Even if it were possible to stabilize the atmospheric concentration of carbon dioxide well below the target of 450ppm, sea levels would continue to rise for centuries, if not millennia, because of the slow but inexorable expansion of the ocean caused by the last 100 years of temperature increase. The rapid stabilization case includes the IPCC’s best case for global mean sea-level rise, an increase of 7 inches by 2100 (see Table 11).30
Table 11: Rapid Stabilization Case: U.S. Average Sea-Level Rise



Sources: IPCC (2007b); authors’ calculations.
For the most uncertain impacts of climate change – precipitation levels, trends in storm intensity, frequency, and path, and ocean acidity levels – the rapid stabilization scenario assumes benign outcomes: in this optimistic case, the only impacts of climate change are temperature increases and sea-level rise. We assume that U.S. weather patterns and the condition of marine ecosystems – which are extremely sensitive to changes in temperature and ocean chemistry – remain constant.


Case Study #1: Hurricane damages in the rapid stabilization case

The rapid stabilization case will reduce hurricane damages, not to zero, but to something more closely resembling current conditions. As explained in Chapter 2, we started with the expected value of annual hurricane damages and deaths, based on recent experience and scaled to the population and GDP of 2006. We then modified this estimate for the modest sea-level rise expected in the rapid stabilization case, and for the expected growth of the U.S. economy and population. (For a more detailed explanation, see Appendix A.) U.S. hurricane damages for the rapid stabilization case are projected to be $13 billion and 23 deaths by 2100, over and above the damages that would be expected if current climate conditions continued unchanged.



Table 12: Rapid Stabilization Case: Increase in Hurricanes Damages to the U.S. Mainland



Source: Authors’ calculations



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